Tag: as is

As-Is Language In Sales Literature Defeats Fraud Claim Involving ’67 Corvette (Updated April 2017)

In late March 2017, a Federal court in Illinois granted summary judgment for a luxury car auctioneer in a disgruntled buyer’s lawsuit premised on a claimed fake Corvette.

The Corvette aficionado plaintiff in Pardo v. Mecum Auction, Inc., 2017 WL 1217198 alleged the auction company misrepresented that a cobbled-together 1964 Corvette was a new 1967 Corvette – the vehicle plaintiff thought he was buying.  Plaintiff’s suit sounded in common law fraud and breach of contract.  The Court previously dismissed the fraud suit and later granted summary judgment for the defendant on the plaintiff’s breach of contract claim.

The Court dismissed the fraud suit based on “non-reliance” and “as-is” language in the contract.  Since reliance is a required fraud element, the non-reliance clause preemptively gutted the plaintiff’s fraud count.

Denying the plaintiff’s motion to reconsider, the Court noted that an Illinois fraud claimant cannot allege he relied on a false statement when the same writing provides he’s buying something in as-is condition.  The non-reliance/as-is disclaimer also neutralizes a fraud claim based on oral statements and defeats breach of express and implied warranty claims aimed at misstatements concerning a product.

By attaching the contract which contained the non-reliance language, the plaintiff couldn’t prove his reliance as a matter of law.

The Court found for the defendant on plaintiff’s breach of contract claim.  The plaintiff’s operative Second Amended Complaint alleged the auction company breached a title processing section of the contract: that it failed to timely deliver title to the vehicle to the plaintiff.

The Court sided with the auction company based on basic contract interpretation rules.  All the contract required was that the defendant “process” the title within 14 business days of the sale.  It didn’t saddle the defendant with an obligation to deliver the title to a specific person.  Since the evidence in the record revealed that the defendant did process and transfer the title to a third party within the 14-day time frame, plaintiff could not prove that defendant breached the sales contract.

The plaintiff also couldn’t prove damages – another indispensable breach of contract element.  That is, even if the auction company failed to process the title, the plaintiff didn’t show that it suffered any damages.  The crux of the plaintiff’s lawsuit was that it was sold a car that differed from what was advertised.  Whether the defendant complied with the 14-day title processing requirement had nothing to do with plaintiff’s alleged damages.

Since the plaintiff could not offer evidence to support its breach and damages components of its breach of contract action, the Court granted summary judgment for the defendant.

Lastly, the Court rejected plaintiff’s rescission remedy argument – that the contract should be rescinded for defendant’s fraud and failure to perform.

The Court’s ruling that the defendant performed in accordance with the title processing language defeated plaintiff’s nonperformance argument.  In addition, the Court prior dismissal of the plaintiff’s fraud claim based on the contractual non-reliance language knocked out the rescission-based-on-fraud argument.

 

Afterwords:

Non-reliance or “as is” contract text will make it hard if not impossible to allege fraud in connection with the sale of personal property;

A breach of contract carries the burden of proof on both breach and damages elements.  The failure to prove either one is fatal to a breach of contract claim.

In hindsight, the plaintiff should have premised its breach of contract claim on the defendant’s failure to deliver a car different from what was promoted. This arguably would have given the plaintiff a “hook” to keep its breach of contract suit alive and survive summary judgment.

 

As-Is Rider in Real Estate Contract Doesn’t Defeat Implied Warranty of Habitability in Home Sale – Fattah v. Bim Deconstruction – Part II of II)

The Fattah v. Bim (2015 IL App (1st) 140171) developer defendant seemed to have double protection.  Not only did the person it sold the home to (Buyer 1) waive the implied warranty of habitability, but Buyer 1’s buyer – the plaintiff – took the home “as-is” pursuant to a contract rider.

Despite the added layer of protection, the court still allowed the plaintiff’s case to proceed against the developer defendant. It’s reasons:

– the “as is” rider was part of the contract between plaintiff and Buyer 1: it has no bearing on plaintiff’s rights versus the defendant;

– even if the “as is” rider did impact plaintiff’s rights versus the  defendant,  the rider wouldn’t negate the implied warranty of habitability;

– that’s because the “as is” rider (in the plaintiff-Buyer 1 contract) didn’t mention the implied warranty of habitability or a waiver of it;

– where a purchaser agrees to accept a house “as is” and the “as-is” provision doesn’t refer to any implied warranties in general and also doesn’t disclose the consequences of waiving an implied warranty, the as-is provision can’t be viewed as a valid disclaimer that a home builder/developer can rely on.

(¶¶ 34-35)

The court also fond that when a purchaser accepts a home as-is, a builder/developer still has to carry its burden of proving the home buyer   knowingly waived the implied warranty of habitability “by showing a conspicuous provision [that] fully discloses the consequences of [the waiver.]”  Since the defendant failed to meet its burden, the as is rider didn’t defeat the earlier waiver of the implied warranty of habitability on the house.

The court further circumscribed the implied warranty waiver signed by Buyer 1.  It held that a waiver of an implied warranty of habitability protects only the person identified in the contract.  It doesn’t extend to unwitting parties (like the plaintiff) unless there is a clear intent for that waiver to apply to a third party.

The as-is rider precludes the plaintiff from pursuing Buyer 1 (who sold the home to plaintiff) for damages based on home defects but it does not impact plaintiff’s rights versus the developer.  The developer defendant was not party to the as-is agreement between plaintiff and Buyer 1  wasn’t a named beneficiary of it.

Now What?

While the plaintiff obtained a reversal of summary judgment in the builder’s favor, he still hasn’t won the case.  He must now carry his burden of proving the defendant breached the implied warranty of habitability.  He must prove: (1) latent defects in the house, (2) that interfere with the reasonably intended use of the house and (3) the latent defects manifested themselves within a reasonable time after the house was purchased.  

The court agreed that the patio collapse constituted a latent defect.  Plaintiff will now have to establish elements (2) and (3) – that the patio defects interfered with plaintiff’s use of the home and that he learned of the defects a reasonable time after he bought the house.